Lotus Resources Insiders AU$14m Short Of Breakeven On Stock Purchase

Insiders who bought AU$17.2m worth of Lotus Resources Limited (ASX:LOT) stock in the last year recovered part of their losses as the stock rose by 15% last week. However, the purchase is proving to be an expensive wager as insiders are yet to get ahead of their losses which currently stand at AU$14m since the time of purchase.

While we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, we do think it is perfectly logical to keep tabs on what insiders are doing.

Check out our latest analysis for Lotus Resources

The Last 12 Months Of Insider Transactions At Lotus Resources

The Technical Director & Executive Director Keith Bowes made the biggest insider purchase in the last 12 months. That single transaction was for AU$17m worth of shares at a price of AU$1.50 each. That means that an insider was happy to buy shares at above the current price of AU$0.27. Their view may have changed since then, but at least it shows they felt optimistic at the time. To us, it's very important to consider the price insiders pay for shares. As a general rule, we feel more positive about a stock if insiders have bought shares at above current prices, because that suggests they viewed the stock as good value, even at a higher price. Notably Keith Bowes was also the biggest seller.

Happily, we note that in the last year insiders paid AU$17m for 12.05m shares. But they sold 11.88m shares for AU$3.5m. In the last twelve months there was more buying than selling by Lotus Resources insiders. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!

Lotus Resources is not the only stock that insiders are buying. For those who like to find small cap companies at attractive valuations, this free list of growing companies with recent insider purchasing, could be just the ticket.

Does Lotus Resources Boast High Insider Ownership?

Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. A high insider ownership often makes company leadership more mindful of shareholder interests. Insiders own 10% of Lotus Resources shares, worth about AU$51m. We've certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.

So What Do The Lotus Resources Insider Transactions Indicate?

There haven't been any insider transactions in the last three months -- that doesn't mean much. But insiders have shown more of an appetite for the stock, over the last year. Overall we don't see anything to make us think Lotus Resources insiders are doubting the company, and they do own shares. While it's good to be aware of what's going on with the insider's ownership and transactions, we make sure to also consider what risks are facing a stock before making any investment decision. For instance, we've identified 3 warning signs for Lotus Resources (2 don't sit too well with us) you should be aware of.

But note: Lotus Resources may not be the best stock to buy. So take a peek at this free list of interesting companies with high ROE and low debt.

For the purposes of this article, insiders are those individuals who report their transactions to the relevant regulatory body. We currently account for open market transactions and private dispositions of direct interests only, but not derivative transactions or indirect interests.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.